The Bank of England has increased interest rates to 0.5%, it was announced on Thursday.
The widely-expected 0.25 percentage point hike follows December’s decision to increase rates to 0.25% from a record low of 0.1%. It is the first time since 2004 that the central bank has opted to lift interest rates at two consecutive Monetary Policy Committee meetings.
The MPC voted for the rise by a majority of 5-4.
The BoE is trying to tackle growing price pressures which have seen inflation hit a near-30-year of 5.4%, well above its 2% target, while ensuring the economy continues to grow post pandemic.
Victoria Scholar, head of investment at Interactive Investor, said: “Amid the backdrop of heightened inflation, the central bank has no choice but to tighten monetary policy in an attempt to curb rising price levels. The MPC has a difficult balance to strike, curtailing price pressures without inducing an economic recession.
“While higher interest rates will take some of the heat out of the economy, it will do little to curb the major supply side pressures, which look set to push inflation to 6%, namely the surge in energy prices, supply chain bottlenecks and labour shortages.”